The Journal Gazette
Friday, August 11, 2017 1:00 am

Snapchat's stock not so snappy

Competition from Facebook factor in 45% drop since IPO

BARBARA ORTUTAY | Associated Press

NEW YORK – Facebook once failed to buy Snapchat; ever since, it's tried to copy it, mostly without success.

Until now. Facebook's Instagram Stories, a clear Snapchat clone, has more daily users than Snapchat itself and parent company Snap Inc. should be worried.

Snap's stock price has fallen 45 percent since its initial public offering in May. While the doom doesn't spell imminent death, it's a sign that Snapchat could be relegated to the sidelines as a niche app for young people – or worse, a passing fad – rather than a major competitor for digital ad dollars like Facebook and yes, even Twitter.

An analyst for Morgan Stanley, the lead underwriter for Snap's IPO, recently cut his rating of the company's stock, citing competition from Instagram and worries that Snap's advertising offerings aren't evolving or improving. The analyst, Brian Nowak, said the company needs to do more so that advertisers don't see it as a mere experiment, but a serious player.

By the numbers

Instagram recently disclosed that Stories, which lets people share videos and snapshots in a continuous 24-hour loop, has amassed 250 million daily users in the year since it launched.

Snapchat, in comparison, had 166 million daily users in the first quarter and that's all of Snapchat, not just its version of Stories. Instagram in its entirety, meanwhile, had more than 400 million daily users as of February, the last official count.

To grow or not

“Facebook has proven themselves to be a fierce competitor,” Gartner analyst Brian Blau said. Facebook, he added, understands how to get more and more people to sign up and keep using its services.

Snap CEO Evan Spiegel has long defended the company's decision not to make user growth its primary mission. He doesn't even like calling Snapchat a social network. He insists it's a camera company.

Although that's an easy way to grow daily users quickly, Spiegel said, Snap doesn't believe “those sorts of techniques are very sustainable over the long term.”

Facebook sends notifications for all sorts of things, such as a friend doing a live video or another friend posting something after an extended absence. Another might be on a new item for sale in the service's “marketplace” section. These notifications can conceivably keep people returning day after day.

Rivals upon rivals

Rivals don't always succeed. Facebook recently shut down Lifestage, which lets those 21 and under share photos, selfies and videos with classmates. Lifestage was aimed at high-schoolers – a big chunk of Snapchat's audience.

Before that, Facebook killed Slingshot, another Snapchat clone for sending disappearing messages. In turn, that followed the demise of Poke, which also let people send photos and videos. All that followed Snapchat's decision to rebuff Facebook's $3 billion offer for the service in 2013.

Google is reportedly working on Stamp, which the Wall Street Journal compared to Snapchat's Discover feature for letting people find photo and video-heavy news items. Published reports say Google is in talks with Vox Media and Time Inc. to create such content.

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